Filing taxes can be complicated, especially when moving to a new state like West Virginia.
This guide provides essential insights into West Virginia's tax system to help new and current residents navigate key taxes for individuals and businesses.
You'll learn about income, sales, property, and other West Virginia taxes, recent changes, tax incentives, and how the state compares nationally - equipping you with the knowledge needed to understand your tax obligations.
Introduction to West Virginia Taxes
West Virginia collects tax revenue from various sources, including income, sales, property, and other taxes. This helps fund critical public services across the state.
How Does West Virginia Collect Tax Revenue?
The state collects tax revenue in a few key ways:
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Income Taxes: West Virginia has a progressive income tax system with rates ranging from 3% to 6.5%. This accounts for over 40% of the state's general revenue fund.
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Sales Taxes: The statewide sales tax rate is 6%. Sales tax accounts for about 30% of West Virginia's tax revenue.
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Property Taxes: These taxes are levied at the county and municipal levels to fund local services. Property taxes account for about 15% of state tax revenue.
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Other Taxes: West Virginia also collects taxes on natural resources extraction, alcohol, tobacco, and other selective goods and services.
Understanding West Virginia’s Tax Landscape
According to the 2024 State Business Tax Climate Index, West Virginia ranks 32nd among all states for its overall tax climate. Key aspects of the state's tax structure include:
- Relatively high income and sales tax rates compared to some states.
- Low property taxes due to restrictions on levy increases.
- Various tax incentives offered, especially for manufacturing businesses.
This tax environment makes West Virginia moderately competitive among U.S. states in terms of attracting businesses and talent.
Recent Changes and Trends in West Virginia Taxation
Some recent developments that impact West Virginia's taxation include:
- A 2019 bill cutting the state’s personal income tax rates. More cuts are slated through 2023.
- A 2016 bill raising the state sales tax from 6% to 7% was repealed a year later.
- West Virginia now collects taxes on e-cigarettes and vaping products.
- There is discussion around tax incentives related to revitalizing coal communities economically.
As with many states, striking the right balance between funding government services and maintaining a pro-growth tax climate remains an ongoing challenge.
At what age do you stop paying property taxes in West Virginia?
In West Virginia, there are certain property tax exemptions available to seniors and people with disabilities. Specifically:
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The first $20,000 of assessed value of owner-occupied residential property owned by a person age 65 or older or by a person who is permanently and totally disabled is exempt from property tax.
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This exemption is available regardless of income.
So there is no specific age where property taxes stop completely in West Virginia. However, turning 65 makes seniors eligible for a $20,000 exemption that lowers their overall property tax bill.
The key things to note are:
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The exemption only applies to owner-occupied residential property. Investment properties or second homes do not qualify.
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The exemption is for the first $20,000 of assessed value. If the home is worth more than $20,000, property taxes still need to be paid on the amount above this.
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People who are permanently and totally disabled also qualify for this exemption, regardless of age.
So while property taxes don't disappear at 65 in West Virginia, this exemption can provide significant savings on property tax bills to eligible seniors and people with disabilities. Checking if you qualify can reduce expenses.
What is not taxed in West Virginia?
Tax-exempt goods Some goods are exempt from sales tax under West Virginia law. Examples include most textbooks, prescription drugs, and medical supplies.
Here are some of the main categories of goods that are not taxed in West Virginia:
- Prescription drugs and medical supplies
- Most groceries and food items
- Textbooks required for school use
- Newspapers and periodicals
- Livestock feed, seeds, and fertilizers used in farming
- Gasoline and special fuels subject to excise tax
West Virginia also does not collect sales tax on services such as:
- Professional services like legal, accounting, engineering
- Personal services like haircuts, dry cleaning, pet grooming
- Health services like medical, dental, hospital stays
- Education services like private school tuition, test preparation
The state has also defined certain tax-free weekends and holidays for back-to-school shopping and Energy Star appliances when certain goods can be purchased tax-free.
So in summary, while West Virginia has a 6% statewide sales tax, it does exempt certain categories of necessary and essential goods and services to reduce the tax burden on its residents. Businesses selling exempt goods or services do not need to collect sales tax on those transactions.
How much of Social Security is taxable in WV?
West Virginia had previously taxed Social Security payments but started phasing out the tax in 2020. As of 2023, Social Security benefits are exempt from state income tax for single filers with federal adjusted gross income below $50,000 and joint filers below $80,000.
For single filers with income between $50,000 and $60,000, the exemption is reduced by $1 for every $4 of income above $50,000. For joint filers with income between $80,000 and $100,000, the exemption is reduced by $1 for every $4 of income above $80,000.
So in summary:
- Single filers with income below $50,000 and joint filers below $80,000 pay no state tax on Social Security benefits
- The exemption is phased out for higher income levels, completely phasing out at $60,000 single and $100,000 joint
- Several other states have also started phasing out taxes on Social Security or are considering doing so
Eliminating taxes on Social Security helps retirees and seniors on fixed incomes afford to live in the state. As more baby boomers reach retirement age, states have additional incentive to reduce this tax burden.
Is West Virginia tax friendly to retirees?
West Virginia can be a tax-friendly state for retirees, although the level of tax benefits depends on your income level. Here are some key points:
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Low property taxes: West Virginia has among the lowest average property tax rates in the U.S. at just 0.53% of home value. This helps make housing more affordable.
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No tax on most Social Security benefits: West Virginia does not tax Social Security retirement benefits as long as your adjusted gross income is below $50,000 as an individual or $100,000 if married filing jointly.
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Low sales tax: The statewide sales tax in West Virginia is only 6%. The average combined state and local sales tax is 6.39%, which is lower than most states. This helps reduce costs of living for retirees.
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Income taxes: West Virginia does have a state income tax with rates ranging from 3% to 6.5%. For higher income retirees, this income tax can eat into retirement savings compared to states with no income tax.
So in summary, West Virginia can be considered tax-friendly for retirees with lower to moderate retirement income levels. But higher income retirees may find they prefer states with lower or no income taxes. As with any state, be sure to evaluate all state and local taxes based on your situation.
West Virginia Income Tax Overview
West Virginia Income Tax Brackets and Rates for 2023
West Virginia has four income tax brackets for 2023, ranging from 3% to 6.5%. The brackets are:
- 3% on the first $10,000 of taxable income
- 4% on taxable income between $10,001 and $25,000
- 4.5% on taxable income between $25,001 and $40,000
- 6.5% on taxable income over $40,000
So for example, a single filer with $50,000 of taxable income would pay:
- 3% on the first $10,000 = $300
- 4% on the next $15,000 = $600
- 4.5% on the next $15,000 = $675
- 6.5% on the remaining $10,000 = $650
For a total of $2,225 in West Virginia income tax.
Utilizing the West Virginia Income Tax Calculator
The West Virginia State Tax Department provides an easy-to-use online tax calculator to estimate your income tax liability. To use the calculator:
- Enter your projected West Virginia taxable income for 2023
- Select your filing status - single, married filing jointly, etc.
- Add any qualifying deductions or exemptions
- Review the calculated estimated tax based on the 2023 tax brackets and rates
The calculator automatically applies the correct tax rate to each portion of your income based on the marginal tax bracket thresholds. This allows you to easily estimate your tax obligation.
Tax Credits and Deductions
West Virginia offers a few major personal income tax credits and deductions, including:
- Low Income Family Tax Credit - Up to $100 credit for filers earning under $10,000
- Military Incentive Credit - Up to $2,400 credit for active duty military pay
- Senior Citizen Tax Credit - Up to $1,000 credit if over age 65
- Standard Deduction - $4,000 if single, $8,000 if married filing jointly
On the business side, West Virginia provides tax credits for hiring veterans, investing in research and development, film industry investments, and more.
Does West Virginia Tax Social Security?
No, West Virginia does not tax Social Security benefits or other retirement income. This can provide notable savings for retirees and seniors residing in the state.
Anticipating West Virginia Income Tax Rate for 2024
No major changes have been proposed yet for 2024 West Virginia income tax rates or brackets. However, some small inflation-based adjustments are possible. Filers can expect a similar income tax structure as 2023. Check the West Virginia State Tax Department website as 2024 approaches for official details.
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West Virginia Sales and Use Tax Compliance
West Virginia has a 6% statewide sales and use tax rate. Additionally, counties and municipalities may impose local sales taxes up to 1%, for a maximum possible combined rate of 7%.
It's important for all businesses selling products or services in West Virginia to understand their sales and use tax obligations. This includes registering for sales tax permits, properly charging tax rates based on delivery locations, filing returns, claiming valid exemptions, and more.
Navigating West Virginia Sales Tax Rates
West Virginia has a 6% statewide sales tax rate plus up to 1% in local taxes, for a total possible rate of 7%:
- State sales tax rate: 6%
- County rates range from 0% to 1%
- City rates range from 0% to 1%
To accurately calculate sales tax rates, businesses should use ZIP code-based rate lookup tools. Rates can vary substantially across different cities and counties.
Some examples of total sales tax rates in major West Virginia cities:
- Charleston: 6%
- Huntington: 7%
- Morgantown: 6%
- Parkersburg: 6%
- Wheeling: 6%
Managing Sales Tax Compliance for Remote Sellers
West Virginia requires out-of-state sellers exceeding $100,000 in annual sales or 200 separate transactions delivered into the state to register and collect West Virginia sales tax. This is known as economic nexus.
Strategies remote sellers can use to simplify sales tax compliance include:
- Registering online with the West Virginia State Tax Department
- Using sales tax software to manage rates and filings
- Integrating certified service providers like Avalara
- Carefully tracking taxability based on delivery addresses
Sales Tax Exemptions and Holidays
West Virginia provides sales tax exemptions on some goods and services, including:
- Most food items for home consumption
- Prescription and non-prescription drugs
- Textbooks and school supplies
The state also holds several sales tax holidays each year:
- Back to School Holiday: Typically a 3-day weekend in early August for clothing, school supplies, computers, etc.
- Energy Efficient Products Holiday: Typically a 4-day weekend in September for qualifying ENERGY STAR® products.
Streamlined Sales Tax (SST) and West Virginia
West Virginia is a full member state of the Streamlined Sales and Use Tax Agreement (SST). This multi-state initiative aims to simplify and modernize sales tax compliance.
As an SST member state, West Virginia provides centralized registration through the SST Registration System (SSTRS). This enables businesses to register with all SST member states simultaneously.
West Virginia also adheres to other SST standards like uniform tax definitions, simplified returns, and electronic filing.
Utilizing Technology for Sales Tax Compliance: Avalara AvaTax
Services like Avalara AvaTax can automate the entire sales tax process for businesses selling in West Virginia, including:
- Automated rate calculations
- Registration management
- Returns filing
- Exemption certificate management
- Error-checking
This improves compliance accuracy and efficiency compared to manual methods.
Navigating West Virginia Property Taxes
This section explains West Virginia property taxes, valuation, exemptions, and tax relief programs impacting homeowners and businesses.
Understanding West Virginia's Property Tax System
West Virginia levies property taxes at the state and local level. The state property tax rate is $0.112 per $100 of assessed value for Class II properties and $0.22 per $100 for Class III and IV properties. Local tax rates vary widely across counties and municipalities.
Key things to know about West Virginia's property tax system:
- Property is assessed at 60% of market value. Property is reappraised every 3 years.
- There are 4 classes of property: Class I (personal property), Class II (residential and agricultural property), Class III (commercial and industrial property), and Class IV (natural resources property).
- Several exemptions and tax relief programs are available, like the homestead exemption and senior citizen tax credit. Over $200 million in relief was issued in 2022.
West Virginia collects over $2 billion annually in property taxes. These taxes fund K-12 schools, county governments, municipal services, and other local needs. Understanding how property taxes are calculated and ways to reduce your tax bill are key for homeowners and businesses.
States With the Lowest Property Tax: Where Does West Virginia Rank?
West Virginia has moderately high property tax rates compared to other states. In 2022, West Virginia had the 18th highest median property tax rate at 1.27% of home value. This is well above states with the lowest property taxes like Hawaii (0.27%) and Alabama (0.43%).
Factors that contribute to West Virginia's higher property tax rates include:
- Reliance on property taxes to fund education - Property taxes account for over 30% of education funding.
- Lack of tax base diversity - Property taxes make up a large share of local tax revenue. Options to diversify revenue are limited.
- Struggling economy - Declining population, job losses in industries like coal, and poor fiscal health strain resources and drive up tax burdens.
While property taxes are higher than average, West Virginia offers meaningful exemptions and tax relief programs to ease burdens on certain groups. Understanding how to qualify for reductions can help offset higher tax bills.
Other West Virginia Taxes and Fees
West Virginia levies several other taxes in addition to income and sales tax. These help fund essential state services.
Gasoline and Fuel Taxes in West Virginia
As of July 2022, West Virginia's gasoline tax is $0.357 per gallon and the tax on diesel fuel is $0.357 per gallon. These taxes help fund transportation infrastructure projects in the state. West Virginia also levies additional fees on alternative vehicle fuels like liquefied petroleum gas, liquefied natural gas, and electric vehicles.
Cigarette Taxes and Smuggling Concerns
West Virginia taxes cigarettes at $1.20 per pack of 20 cigarettes. This is to discourage smoking due to its adverse health effects. However, high cigarette taxes have led to increased cigarette smuggling from states with lower tax rates. More enforcement is needed to combat this illegal activity.
Excise Taxes on Wireless Services in 2023
West Virginia imposes an 8.5% excise tax on wireless telecommunication services, which is estimated to generate over $50 million in revenue in 2023. This tax applies to mobile services, pagers, and other wireless devices. The revenue helps fund various state expenditures.
Tax Incentives and Economic Development in West Virginia
Leveraging Tax Credits for Business Growth
West Virginia offers several tax credit programs to incentivize business growth and job creation in the state. Key programs include:
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The Economic Opportunity Tax Credit - Offers a credit equal to 80% of qualified wages paid to eligible new employees. Can offset up to 100% of tax liability.
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The Manufacturing Investment Tax Credit - Offers a credit equal to 5% of qualified manufacturing investment up to $2 million. Can be carried forward for up to 5 years.
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The High Growth Business Investment Tax Credit - Offers a credit equal to 50% of investment in eligible West Virginia high growth businesses.
Strategically utilizing these credits can significantly reduce state tax liability for qualifying businesses that are expanding operations and adding jobs in West Virginia. Proper documentation and application is required to claim the credits.
Property Tax Abatement Programs
West Virginia has several property tax relief programs to incentivize business investment:
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The Industrial Expansion and Revitalization Credit offers a property tax credit equal to 70% of eligible investment in an industrial facility. Credit lasts for 10 years.
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The Commercial Patent Incentives Tax Credit offers a tax credit equal to 100% of ad valorem property tax on certain eligible patents or patent applications.
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Tax Increment Financing (TIF) allows businesses to use new property tax revenue generated from investment projects to finance certain development costs.
Checking county and municipal level programs can reveal additional property tax incentives for business investment and job creation. Consult with an accountant to utilize these programs to significantly abate property tax expenses.
Tax Comparisons: West Virginia and Beyond
Facts & Figures: How Does West Virginia Compare?
West Virginia's tax structure ranks favorably compared to other states in several key areas:
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The state has no personal income tax on Social Security benefits, while 13 states still tax Social Security income. This makes West Virginia an attractive retirement destination.
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West Virginia has low property taxes, ranking #6 for the lowest effective residential property tax rate at just 0.53% of home value. This reduces housing costs for residents.
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The state has among the lowest wireless taxes in the country. West Virginia collects an average of $3.15 in wireless taxes and fees per subscriber each month, lower than the national average of $4.54.
However, West Virginia struggles in other tax comparisons:
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It has one of the worst rankings for business taxes. West Virginia places #42 in the 2023 State Business Tax Climate Index which measures corporate, individual, sales, unemployment and property taxes.
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The state has higher than average sales tax rates. At 6.0% plus an average local rate of 0.33%, West Virginia's combined sales tax rate of 6.33% is higher than the average local+state rate of 6.11% nationwide.
So while West Virginia shines for retirement and low property taxes, it lags behind in corporate taxation and sales tax competitiveness.
How Do Taxes Affect Interstate Migration to West Virginia?
Research shows that taxes do influence migration patterns across states. According to the Tax Foundation, nearly 5 million Americans moved from high-tax states like California, New York and Illinois to lower-tax states like Texas, Florida and West Virginia in recent years.
Specifically for West Virginia, a 2021 study found that for every 1% increase in the effective state and local tax rate, the state loses 1.9% of its population due to outward migration. So high taxes repel both businesses and individuals.
Conversely, West Virginia stands to attract more residents by maintaining low income taxes, negligible taxes on retirement income, and competitive property taxes. Its lackluster corporate tax climate remains an obstacle though.
2024 State Business Tax Climate Index: West Virginia's Position
West Virginia is expected to rank #41 overall in the 2024 State Business Tax Climate Index to be released in October 2023. This means it will continue lagging most other states in terms of corporate taxation and overall business friendliness.
While the state posts mixed results across different tax categories, its poor corporate tax structure drags down the overall rank. West Virginia collects a Corporate Net Income Tax of 6.5%, a Business Franchise Tax, and a Severance Tax on coal, gas and timber. These taxes negatively impact business growth.
To improve competitiveness, West Virginia may need to reduce corporate taxes, simplify tax compliance policies, or enhance R&D and investment credits for business taxpayers. An improved ranking could help attract more jobs and economic activity.
Conclusion: Navigating West Virginia's Tax System
Essential Points for Taxpayers and Businesses
West Virginia's tax system can seem complex, but keeping these key points in mind can help taxpayers and businesses stay compliant:
- File income tax returns by April 15 each year. Extensions are available if needed.
- Know your tax bracket - West Virginia has 5 income tax brackets ranging from 3% to 6.5%.
- Sales tax is 6% statewide. Be aware if you meet economic nexus thresholds.
- Review new tax laws and policies each year for changes. Sign up for email updates.
- Use online calculators and resources from the State Tax Department website.
- Seek help from a tax professional if you have questions or complex tax situations.
Preparing for West Virginia Delinquent Tax Sale 2023
If you have outstanding state tax debts, it's important to resolve these to avoid your property being auctioned in 2023's tax sale:
- Contact the State Tax Department to review payment plans or alternative solutions.
- Explore loan options if a lump-sum payment isn't feasible.
- Consult a tax attorney regarding bankruptcy protections or other legal options.
- Attend a tax sale workshop to understand the process and protect your rights.
- If your property is sold, you may have redemption rights within 18 months in some cases.
Taking proactive steps can help taxpayers and businesses avoid issues with West Virginia's tax authorities. Being informed on the latest tax policies is key to staying compliant.
